Southwest Norway - a Culture for Innovation? Soft Institutions and Regional Innovation

Southwest Norway - a Culture for Innovation?

Soft Institutions and Regional Innovation

Rune Dahl Fitjar

Outline• Background for the project• Southwest Norway management

culture– Indicators and comparisons

• The relationship between soft institutions and innovation– Research questions, hypotheses and

theoretical perspectives– Main findings

Background• Scenarios 2020

– 2006 project outlining the past, present and future of regional development in four regions:

• Southern Norway• Dalane/Lister• Stavanger• Haugalandet

– Conducted by IRIS (Gjelsvik, Nødland, Leknes and Holmen), Agder Research (Hidle) and Berrefjord & Thomassen (Berrefjord, Thomassen and Dinesen)

Scenarios 2020 – main findings• The Stavanger region as a model of

innovation-driven regional development• The impact of cooperation

– Private-public partnerships– Inter-municipal cooperation– Formal and informal networks

• A set of regional values and attitudes serving as the basis for cooperation and innovation– See next slide

Values and attitudesThe Nordic Model

– Egalitarianism, providing production of welfare– Trust, providing sharing of knowledge and

information– Short distance to power, providing

management based on participation and influence of workers

– Inclusion, providing a wide basis of competence– Open-mindedness, providing flexibility,

curiosity and the ability to change– Protestant work ethic, providing diligent and

efficient workers who take personal responsibility

Attitudes of Regional Managers• 2007 project examining

– whether the values and attitudes outlined by Scenarios 2020 are actually present in the four regions

– the innovativeness of companies in the region

• Based on survey data of regional elites– Businesses: CEOs of companies with 5 employees or more– Public sector: Senior officials in regional councils and

schools– Politicians: Representatives on municipal & county Exec

boards

• The survey was completed in two stages:– Telephone interviews (Oct/Nov 2007): 1670 in total.– Online questionnaires (Nov/Dec 2007): 706 completed.

The sampleHaugaland

Stavanger Agder

Telephone

329 684 585

Web 145 318 218Public sect

Politicians Businesses

Telephone

239 280 1151

Web 138 132 436

Attitudes of Regional Managers – main findings• No major value differences between the four

regions– If there is a regional management culture, it is common

across Southwest Norway• Some indications of cultural cleavages with rest of

Norway:– Higher levels of trust, flexibility and openness– Lower levels of egalitarianism

• An elite culture that differs from mass culture in the region– Lower levels of egalitarianism– Less respect for authority– Higher levels of flexibility and openness– A stronger presence of values and attitudes that are

characteristic of the region

Regional Innovation Cultures• Project financed by the Stavanger Centre

for Innovation Research• Purpose: Examine the relationship

between soft institutions, cooperation and regional innovation in Southwest Norway

• Based on the data from the Attitudes of Regional Managers project, and testing key hypotheses of the Scenarios 2020 project

• Conducted by IRIS (Fitjar) and LSE (Rodríguez-Pose)

Soft Institutions of Innovation• Innovation as a territorially embedded

process– Need to understand social and institutional

conditions of the space in which it takes place (Rodríguez-Pose and Crescenzi 2008)

– Unique set of circumstances in each region– Institutions, policies, networks, social values and

norms act as conditions rendering some courses of action easier than others (Morgan 2004)

• How do the soft institutions in SW Norway affect collaboration and innovation?

The Soft Institutions of SW NorwayRegional self-perceptions:• ”The Harmony Culture”

– Intra-group trust and collaboration– Absence of conflict

• ”The Open Port”– Open-mindedness to foreign influences– Implementation of new ideas

Indicators of ”the Harmony Culture”• Politicians and public sector managers trust in each

other, themselves and business managers to a large extent

• Business managers trust a lot more in each other than in the authorities

• High level of agreement on the importance of maintaining regional employment rather than profit maximisation

• Local authorities have a more positive perception of their relationship with regional businesses than do business managers

• The differences between the three regions are small

Trust:Most people can be trusted, % agree

0

10

20

30

40

50

60

70

80

90

100

Stavanger Norway

Public sect

Politicians

SMEs

Large comp

I trust politicians in this region, balance of opinion

-40 -20 0 20 40 60 80

Agder

Haugaland

Stavanger

Public sect Politicians SMEs Large comp

Trust politiciansDon’t trust politicians

I trust public officials in this region, balance of opinion

0 20 40 60 80 100

Agder

Haugaland

Stavanger


Trust public officialsDon’t trust public officials

I trust business managers in this region, balance of opinion

0 20 40 60 80 100

Agder

Haugaland

Stavanger


Trust business managersDon’t trust business managers

It is sometimes right to let employees get their way even where other options would have been better

0 10 20 30 40 50 60 70 80

Agder

Haugaland

Stavanger

Public sect SMEs Large compRight to let emplget their way

Not right to let employeesget their way when otheroptions are better

If employees participate in decision-making processes, they often block the chances to reach a decision

-100 -80 -60 -40 -20 0

Agder

Haugaland

Stavanger

Public sect SMEs Large compEmployees oftenblock decisions

Employees don’toften block decisions

It is often easier to cooperate with local or regional actors than people from other parts of the country

-30 -20 -10 0 10 20 30 40 50

Agder

Haugaland

Stavanger


Easier to cooperate with locals

Not easier to cooperate with locals

It is important to maintain employment in the region, even if it should hurt the business’ profits

0 10 20 30 40 50 60

Agder

Haugaland

Stavanger

SMEs Large comp

Important to maintainemployment in region

Business’ profitsmost important

We have good relations with businesses / with local authorities, balance of opinion

0 20 40 60 80 100

Agder

Haugaland

Stavanger

Public sect and politicians Businesses

Have good relationsNot good relations

We / Local authorities provide a good framework for regional businesses / our company, balance of opinion

0 10 20 30 40 50 60 70 80

Agder

Haugaland

Stavanger


Provide a good frameworkDon’t provide a good framework

Businesses / Local authorities are on our side in developing the region, balance of opinion

0 20 40 60 80 100

Agder

Haugaland

Stavanger


On our sideNot on our side

Indicators of ”the Open Port”

• Some indications of a greater openness to new ideas and foreign cultures than the national average

• The differences are partly, but not fully, explained by levels of urbanisation

• Elites tend to be more open-minded than the general public

• Public-sector managers and politicians tend to be more open to foreign cultures than business managers

The old and proven is usually better than newfangled ideas, balance of opinion

-80 -70 -60 -50 -40 -30 -20 -10 0

Norway

Stavanger

Population Public sect Politicians SMEs Large comp

The old andprovenNewfangled ideas

I need to improve my understanding of other countries’ cultures, balance of opinion

-20 0 20 40 60 80 100

Agder

Haugaland

Stavanger

Public sect Politicians SMEs Large compNeed to improveunderstanding

Don’t need to improveunderstanding

I am most comfortable around people who are open to change and new ideas, balance of opinion

0 20 40 60 80 100

Norway

Stavanger


Most comfortablearound open people

Not most comfortablearound open people

I wish Norway and Norwegians were more open to the world around us, balance of opinion

0 20 40 60 80 100

Norway

Stavanger


Wish thatNorwegianswere more open

Does not wish thatNorwegians were more open to world

Work should always come first, even if that means less leisure time, balance of opinion

-40 -30 -20 -10 0 10 20 30 40

Agder

Haugaland

Stavanger

Total

Work shouldalways come first

Work shouldn’talways come first

The impact of the soft institutions• There are some indications that ”the

Harmony Culture” and ”the Open Port” form part of the regional management culture in Southwest Norway

• How does this affect innovation?– Do the managers’ values affect innovation?– Is collaboration helpful to innovation?– Do the managers’ values affect cooperation?

Research Questions”Does collaboration affect innovation, and if so, does the physical proximity of partners affect innovation?”

”Do soft institutional factors (regionalised values and attitudes) affect innovation?”

The importance of collaboration• Collaboration matters for the innovative

capacity of firms– Open innovation (Chesbrough 2003): External

search for technology prior to internal R&D– User-driven innovation (von Hippel 1986, 2005)

• ”Creative Commons” • Wikinomics (Tapscott and Williams 2006)

– Value chains– ”The Strength of Weak Ties” (Granovetter 1973)– Absorptive capacities (Cohen and Levinthal

1990)

Regional cooperation• The location of partners matters

– Differences across regions in levels of economic development and innovation in spite of globalisation and ”the end of territory”

– Benefits of regional cooperation:• Face-to-face contact (Florida 2005)• Relational assets, untraded interdependencies

(Storper 1997)• ”The Associational Economy” (Cooke and Morgan

1998)• Non-substitutable locational assets (Brenner 2002)• Territorially concentrated clusters (Porter 1990)

Global cooperation• The location of partners does not matter

– ”The World is Flat” (Friedman 2005): Innovate without having to emigrate

– Benefits of international cooperation: • Knowledge spillovers regardless of national borders

(Audretsch and Feldman 2004)• Personal networks are increasingly international

(Huber 2007)• Global value chains and production networks (Gereffi

and Korzeniewicz 1994)• Regions as hubs

HypothesesH1: Collaboration with a wide range of

partners has an impact on the innovative capacity of firms

H2A: Collaboration within the region is most important

H2B: Collaboration with international partners is most important

The social filter• Trust and open-mindedness as soft

regional institutions in SW Norway – Values affect the absorption and diffusion of

knowledge among businesses– Form part of regional ”social filter” determining

the innovation proneness of the region (Rodríguez-Pose 1999)

– Technological learning capacity of firms in the region dependent on presence of innovative components in the social filter

– Collective attitude towards innovation and social change form an important part of the filter (Crescenzi, Rodríguez-Pose and Storper 2007)

Innovation Proneness and the Social Filter

Rodríguez-Pose 1999: ”Innovation Prone and Innovation Averse Societies”

Trust and open-mindedness• Trust

– Important for cooperative interaction (Fukuyama 1995)– Promotes mutual assistance and diffusion of technical

innovations (Putnam 1993)

• Open-mindedness– Important for allowing ideas to develop– Realising potential in unexpected places– Accepting diversity of opinions and ideas

• This affects capacity for – Product innovation– Radical product innovation– Engaging in collaborative innovation networks

Hypotheses (cont.)H3: Trust and open-mindedness of the

manager affects firm’s capacity for innovation

H4: Trust and open-mindedness of the manager affects firm’s propensity to collaborate with external partners

H5: Trust is more important for collaboration within the region, while open-mindedness is more important for collaboration with international partners

Analytical Model

Trust• General• Work-related

Open-mindedness• General• Work-related

Cooperation

Geographical orientation of cooperation

Innovation

Operational variables

Dependent variables• Product innovation

– Has your company during the past 3 years introduced into the market new or significantly improved products (goods or services)?

• Radical product innovation– Were any of these product innovations

new to the market?

Measures of Regional Innovation

431

(80.3 %)346

(19.7 %)85

Radical product innovation

431N

(47.3 %)204No

(52.7 %)227Yes

New products in the last 3 years

Regional Innovation Forms• Dominant forms of innovation

– Innovation in-house• New products and processes are developed within

individual businesses in the region

– Innovation in collaborative networks• New products and processes are developed in

cooperation between multiple partners

– Innovation through adoption or assimilation• New products and processes are developed through

copying and/or improving on someone else’s innovations

• What is the dominant form in SW Norway?

Innovation Forms in SW Norway Products developed...

mainly by our company 118 (53.4 %)

in cooperation with other companies 81 (36.7 %)

mainly by other companies 22 (9.9 %)

N

(Innovative companies only)

221

Operational variables (cont.)Cooperation variables• Has your company cooperated with other

companies and/or organisations on innovations over the last 3 years? If so, what kinds of partners have you used and where were they located?– Three location types: Local/regional, national

and international– Seven partner types: Other companies within

the conglomerate, suppliers, customers, competitors, consultancies, universities and research institutes

Cooperation at different geographic levelsGeographical location of partner

Used at least one partner

Median no. of partners

Mean no. of partners

Std. dev. from mean

Regional 55 % 1 1.22 1.50

National 61 % 1 1.31 1.43

International

35 % 0 0.66 1.12

Use of partner types by geographical location

0

10

20

30

40

Inte

rnal

Supplie

rs

Custo

mer

s

Compe

titors

Consu

ltanci

es

Unive

rsiti

es

Resea

rch In

stitu

tes

% o

f co

mp

anie

s

Regional

National

International

Trust – dimensions created through PCAGeneral Eigenvalue:

1.67Rho: 0.56

Factor loading Unexpl.

Most people can be trusted 0.34 0.80

I trust public officials in this region 0.66 0.26

I trust politicians in this region 0.66 0.26

Work-related Eigenvalue: 1.22

Rho: 0.41


I trust other business managers in this region

0.44 0.76

Right to include employees in dec-making 0.66 0.47

Right to let employees get their way 0.61 0.55

Open-mindedness – dimensions created through PCAGeneral Eigenvalue:

1.75Rho: 0.58


Most comf around people open to change 0.52 0.52

Improve understanding of foreign cultures 0.57 0.43

Wish Norwegians were more open to world 0.63 0.30

Work-related Eigenvalue: 1.36

Rho: 0.68


Work is what gives meaning to life 0.71 0.32

Work provides identity and belonging 0.71 0.32

Control variables

• Manager’s level of education• Manager’s age• Company size• No. of company directorships held by

manager• Share of company held by foreign

owners

Two Models of Product Innovation

0.14 (0.08)

0.30** (0.13)

Model 2

488.64

Incl.

-0.03 (0.08)

National innovation partners

International innovation partners

495.11-2 log L

Incl.Controls

Local innovation partners

0.12* (0.07)Total innovation partners

Model 1N = 376

* p

< 0

.10,

**

p <

0.0

5, *

** p

<

0.01

Introducing values and attitudes

462.96

Excl.

0.19**

0.12

-0.00

-0.03

0.36***

0.11

-0.07

Model 4

454.50

0.08

0.01

-0.06

0.27*

0.21**

Model 5

Incl.

0.12

-0.04

469.08-2 log L

General open-mindedness

Work-related trust

General trust

0.40***International Innovation Partners

Work-related open-mindedness

Excl.Controls

0.12National Innovation Partners

-0.08Local Innovation Partners

Model 3N = 355

* p

< 0

.10,

**

p <

0.0

5, *

** p

<

0.01

Two Models of Radical Product Innovation

0.01(0.10)

0.42*** (0.14)

Model 2

352.01

Incl.

0.06 (0.10)

National innovation partners

International innovation partners

358.74-2 log L

Incl.Controls

Local innovation partners

0.13(0.08)Total innovation partners

Model 1N = 376

* p

< 0

.10,

**

p <

0.0

5, *

** p

<

0.01

Introducing values and attitudes

331.69

Excl.

-0.05

0.23*

-0.21

0.21

0.42***

-0.02

0.01

Model 4

318.66

0.16

-0.19

0.18

0.37***

0.01

Model 5

Incl.

-0.03

0.04

340.05-2 log L

General open-mindedness

Work-related trust

General trust

0.44***International Innovation Partners

Work-related open-mindedness

Excl.Controls

-0.01National Innovation Partners

-0.00Local Innovation Partners

Model 3N = 355

* p

< 0

.10,

**

p <

0.0

5, *

** p

<

0.01

Model of Innovation NetworksN = 355, R2

adj = 0.08 Coeff. S.E. Beta

General trust -0.11 (0.08) -0.08

Work-related trust 0.18** (0.09) 0.11

General open-mindedness 0.21*** (0.07) 0.16

Work-related open-mindedness -0.07 (0.07) -0.05

Education 0.07 (0.11) 0.04

Age -0.00 (0.01) -0.01

Company size (100s of employees) 0.15*** (0.05) 0.16

No. of company directorships 0.08* (0.04) 0.10

Share held by international owners 0.01** (0.00) 0.10

* p

< 0

.10,

**

p <

0.0

5, *

** p

<

0.01

Innovation Networks at Different LevelsN = 355 Regional National Int’nat’l

General trust -0.00 -0.10 -0.06

Work-related trust 0.16** 0.03 0.05

General open-mindedness 0.01 0.14** 0.09**

Work-related open-mindedness -0.08 -0.03 0.06

Education -0.27*** 0.18* 0.15**

Age 0.00 -0.00 -0.00

Company size (100s of employees) 0.11** 0.17*** 0.10***

No. of company directorships -0.03 0.07* 0.04

Share held by international owners -0.01*** -0.00 0.02***

Adjusted R2 0.05 0.08 0.32

* p

< 0

.10,

**

p <

0.0

5, *

** p

<

0.01

Conclusion• Nearly half the businesses in SW Norway involve

external partners in new product development processes

• The proximity of partners does not matter: Cooperating with international partners is most helpful to the development of new products, as well as for radical product innovation

• Work-related open-mindedness is helpful to product innovation

• General open-mindedness of the manager is important when building an international network

Documents

Southwest Norway - a Culture for Innovation? Soft Institutions and Regional Innovation